Correlation Between Hollywood Bowl and Live Nation

Can any of the company-specific risk be diversified away by investing in both Hollywood Bowl and Live Nation at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hollywood Bowl and Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hollywood Bowl Group and Live Nation Entertainment, you can compare the effects of market volatilities on Hollywood Bowl and Live Nation and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hollywood Bowl with a short position of Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hollywood Bowl and Live Nation.

Diversification Opportunities for Hollywood Bowl and Live Nation

0.23

Correlation Coefficient

Hollywood Bowl  Live Nation

Modest diversification

The 3 months correlation between Hollywood and Live is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment and Hollywood Bowl is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hollywood Bowl Group are associated (or correlated) with Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of Hollywood Bowl i.e., Hollywood Bowl and Live Nation go up and down completely randomly.

Pair Corralation between Hollywood Bowl and Live Nation

Assuming the 90 days horizon Hollywood Bowl is expected to generate 2.05 times less return on investment than Live Nation. In addition to that, Hollywood Bowl is 1.01 times more volatile than Live Nation Entertainment. It trades about 0.04 of its total potential returns per unit of risk. Live Nation Entertainment is currently generating about 0.08 per unit of volatility. If you would invest  6,699  in Live Nation Entertainment on October 4, 2024 and sell it today you would earn a total of  5,856  from holding Live Nation Entertainment or generate 87.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hollywood Bowl Group  vs.  Live Nation Entertainment

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Live Nation Entertainment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hollywood Bowl and Live Nation

The main advantage of trading using opposite Hollywood Bowl and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hollywood Bowl position performs unexpectedly, Live Nation can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Live Nation will offset losses from the drop in Live Nation's long position.

The idea behind Hollywood Bowl Group and Live Nation Entertainment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.